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Energy Bill Illusions

With Congress back from recess and energy prices
soaring, politicians are beating the drums to stir up public
support for the energy bill stalled in the Senate. The United
States “desperately needs a coherent energy policy, and S. 2095
(the bill in question) will address many of the critical issues
facing our nation,” say 20 senators of both parties in a letter to
Senate Majority leader Bill Frist. President Bush likewise charges,
“If [lawmakers] are interested in jobs staying here at home, if
they’re interested in creating an environment in which we’re
competitive, we need an energy bill, one that encourages
reliability for electricity, and one that encourages conservation
and helps us become less dependent on foreign sources of
energy.”

This is not simply nonsense — it’s nonsense on stilts.

Why must the government establish a “coherent energy policy”?
Generally, we’ve left decisions about energy investments to private
investors. Five- or ten-year economic plans are traditionally the
stuff of Russian Politburos, not American presidents. It’s amazing
to hear Republican politicians argue that, absent some guidance
from Washington, businessmen will blindly stumble through the
marketplace, unable to intelligently invest in the energy sector
absent some sort of congressional blueprint. It’s also insulting to
one’s intelligence to hear politicians claim that, absent political
interference in the marketplace, consumers will not have the
faintest idea how to conserve energy or even be aware of the
benefits of doing so in the face of high prices.

In short, we can either allow private investors and supply and
demand to dictate the contours of America’s energy economy or we
can allow politicians and government planners to do so. Aren’t
Republicans supposed to favor the former and not the latter?

President Bush’s contention that the energy bill promises a cure
for everything that ails the economy is likewise preposterous.
Almost every one of the 1,000-plus pages of the bill is dedicated
to throwing taxpayer subsidies at politically favored energy
industries. Now, it’s no surprise that the companies which will
receive this kind of gift are all for it — or that the employees
of those companies and the businesses dependent upon them are
likewise charmed by the proposal. But with the federal government
already a half trillion dollars in the red, can we really afford
such generosity, particularly when the recipients of this
tax-funded largesse are among the largest and healthiest
corporations in the world?

Nor is there any reason to think that spreading federal tax
dollars like pixy dust over uncompetitive technologies will
magically transform them from ugly market ducklings into beautiful
economic swans. If something like clean coal technology has
economic merit, it will have no trouble attracting investors. If it
doesn’t, then no amount of federal subsidy will magically give it
economic merit.

This is not ivory tower theory — it’s hard historical fact. If
throwing tax money at “neat-o” technologies that couldn’t pull
their weight in the marketplace were a worthwhile endeavor, we’d
all be driving cars powered by “synfuels,” or, alternatively,
tooling around in roomy, conventional automobiles getting 75-plus
miles per gallon. Meanwhile, we’d be lighting our homes with
electricity generated by the neighborhood fusion power plant (or,
alternatively, from nuclear power plants delivering electricity
that was literally “too cheap to meter”), or would even have
unplugged from the power lines completely thanks to ubiquitous,
low-cost residential solar energy panels.

Today’s political energy fads — be they “clean coal”
technology, hydrogen powered fuel cells, or whatever — are no
different than yesterday’s. Nor are today’s politicians any better
positioned to outguess private investors than yesterday’s. All that
has changed is a new set of hucksters have come around to fleece a
new set of voters. We might as well burn the money and dance around
the fire for all the good these expenditures will do.

Putting established energy sectors on the dole is even less
justified. If investors can’t make a buck by building a natural gas
pipeline from the Alaskan North Slope to southern Alaska, then fine
— it tells us that the project will be a net drain on the economy.
Likewise, if small oil producers in the Lower48 can’t compete with
producers elsewhere, it tells us that their labor and capital could
be more productively invested elsewhere. Subsidizing such projects
and industries simply shovels money into an economic black
hole.

Virtually nothing in the energy bill currently languishing in
the Senate will improve the performance of America’s energy
markets. On the contrary, it would transfer money from taxpayers to
well-connected energy industries that either don’t need the hand
out or shouldn’t get it in the first place. America should “just
say no” to this modern version of political tonic water.